Impact of floods on textile industry of Pakistan
by Dr. H.R. Sheikh, Professor Emeritus, Textile Institute of Pakistan.

Jang Forum at Federation House at Karachi deliberated  on the impact of floods on the textile industry of Pakistan. PTJ is pleased to reproduce some of the questions raised at Forum on the “Impact of Floods on the Textile Industry” and find answers to the following questions:

  1. How much damage has been inflicted on the cotton crop by the recent rains and floods?

  2. What would be the effects on Pakistan’s exports and especially on textile exports?

  3. What changes are under consideration in economic policies and plans?

  4. What steps should be taken by the Government to rehabilitate cotton farmers?

  5. What is the importance of textile industry in the economy of Pakistan?

Following experts of the industry participated at the Jang Forum: Dawood Usman Jhkora, Vice-President FPCCI, Mirza Ikhtiar Baig, Adviser Textile GoP, Chairman Baig Group of Industries, Yunus Khamisani, Former Chairman North Karachi Association of Trade and Industry and Asif Inam, Vice Chairman APTMA. Views of these industrialists are briefly reported as follows:

Cotton crop damage

 Cotton Crop in Punjab has not been affected much by the rains. However, about 35% to 40% of the Cotton crop has been damaged in Sindh.

The official estimate of expected cotton production was 15 million bales comprising of 10.5 million from Punjab and 4.5 million from Sindh. Assuming cotton production of Sindh at approximately 2.5 million bales, total cotton production is likely to be about 13 million bales this year 2011-12. The Spinning Sector of the textile industry of Pakistan consumes approximately 14 million bales of 375 LBS (170 KGMS) each annually. Consequently, at least 1.0 million bales will be needed to meet the requirements of the spinning sector.

The Government of Pakistan allows “Free Trade Policy”, and cotton can be exported as well imported duty free in Pakistan. Hence shortage of cotton production due to floods and rains will not create problems for the textile industry. However, the reports of damage to cotton crop can escalate cotton prices. The massive floods of summer 2010 resulted in escalation in cotton prices from Rs 7150 per maund in October 2010 to Rs 12,500 per maund in March 2011. Similarly recent floods and rains have damaged 35 to 40% of the cotton crop in Sindh! Cotton prices of Base Grade have escalated from Rs 5,500 per maund to about Rs 6500 per maund.

In order to improve the cotton production capability of Pakistan, USA will provide US $ 9 million aid during the 3 year period from 2010 to 2012 in three instalments.

Effects on total exports

In order to achieve the target of US $ 25 billion total exports from Pakistan serious efforts are being by the concerned departments of the Government of Pakistan (GoP). For example,

  • Duty free exports of garments to China Free Trade Agreement FTA (second phase) is expected to be signed in 2012,
  • Others measures, such as preferential Trade Agreement (PTA) will be signed by GoP with Turkey for withdrawal of anti-dumping duty on garments and fabric exports from Pakistan. WTO rules prohibit imposition of anti–dumping or local protective duty on exports of products from country which has PTA with the importing country.
  • European Union allowed exports of 75 products duty free Pakistan. However facility was withdrawn because of objections raised by India. GoP has taken up the issue with the Indian Trade Promotion Bureau (ITPB).

During his recent visit, Anand Sharma, Indian Commerce Minister, said, “an array of legal and regulatory barriers has restricted official exchanges to $2.7 billion but he is hopeful that the sum would jump in the coming years. We hope to double this figure in a three-year period. Once direct trade through (the) land route is facilitated, there will be a manifold increase,”

At present, Pakistan maintains a list of 1,945 items allowed to run from India to Pakistan, only 108 of which can be trafficked directly by road through Wagah. Pakistan granted India ‘Most-Favoured Nation’ status last year, paving the way for a radical reorganisation of trade. In 1996, India had granted Pakistan a similar status, intended to remove discriminatory higher pricing and duty tariffs.

Pakistan had shown the willingness to move towards a regime which deepens and diversifies trade with India, on its part has been working towards visa reforms. Deepening economic engagement is seen as crucial to establishing lasting peace between the two neighbours.

The above listed efforts of the GoP will lead to substantial improvement in exports from Pakistan including textile exports.

Economic policies and plans

 Quality of cotton deteriorates because of rough hand picking and sub-standard ginning. The female pickers remove leaf, shales, hulls, burrs, grass etc. along with seed cotton. Some foreign contaminants such as human hair, wool fibres from pickers clothing and polypropylene fibres from polypropylene bags are also included in seed cotton during removal from field to the farm godown.

The process of ginning is also carried out in a sub-standard manner. The gin-stand huller fronts are not operated effectively. Hulls are broken up and carried forward with the lint. Similarly, seed coat fragments are also crushed and included in the lint. The International Textile Manufacturers Federation (ITMF) placed Pakistan Cottons under the most “contaminated description” on the basis of survey conducted in 1999.

Clean Cotton Program

 In order to promote the production of clean, contamination free cotton “Clean Cotton Program” has been lunched by the Ministry of Textile Industry (MINTEX in collaboration with the Pakistan Cotton Ginners Association (PCGA), Punjab and Sindh Governments. Pakistan Cotton Standards Institute (PCSI) has been given a central role in the “Clean Cotton Program” MINTEX continued this program upto 2008-09. Clean cotton bales procured under this program are listed in Table 1 on previous page.

It is obvious from the data reported above that the scope of ‘clean cotton program is limited. Due to poor quality of ginned and even contaminated cottons, the prices of Pakistani cotton, yarns and fabrics are discounted in the international export market. Textile industry of Pakistan suffers a loss of about US $ 1.124 billion per annum on account of contaminated cottons as per independent estimates.

It is therefore necessary not only to continue ‘Clean Cotton Program” but also widen its scope and implement it more effectively so that processes of cotton picking and ginning are improved, clean contamination free cotton are produced and price discounts can be avoided.

Rehabilitation of the cotton farmers

As already mentioned about 35 to 40% of the cotton crop has been damaged in Sindh. Cotton production has declined from 4.5 million bales to about 2.5 million bales. Cotton crop of about 0.5 million farmers has been damaged resulting in financial loss of about Rs 70 billion!

In order to rehabilitate the farmers in Sindh the President of Pakistan Mr. Asif Ali Zardari has announced the supply of free seeds and fertilizers to the farmers of the flood affected areas.

Concept of crop insurance is implemented all over the world to save the farmers from losses due to natural calamities. In order to start the insurance of crops in Pakistan Ministry of Textile Industry should develop the required procedure in collaboration with the Ministry of Food and Agriculture and encourage the participation of the farmers. If the crops are insured, the Insurance Companies will pay up for the losses suffered by the farmers on account of natural calamities.

Furthermore the Disaster Management Authority should develop strategy at the Federal and Provincial level for construction of large number of small dams on priority basis.

A sum Rs 515 billion has been provided in the Budget for the construction of dams. Small dams can be used for storage of water in case of future floods and heavy rains and damage to crops can be prevented.

Importance of the textile industry

The textile industry is the back bone of the economy of Pakistan. The textile industry exports contribute about 9% of the Gross Domestic Product (GDP) and employs 46% of the total labour force of the manufacturing sector. Textile and clothing exports are about 58% of the total exports from Pakistan.

However, the textile industry of Pakistan is facing crisis, such as Electricity and gas load - shedding, unsatisfactory law and order situation, terrorism and target killing and high cost of doing business are some of the problems being faced by the textile and other industries.

Foreign importers of garments are unwilling to visit Karachi to check the quality of garments offered for sale. Instead they suggest Dubai, Colombo and Dhaka as places for such visits. It is also reported that the industrialists are considering shifting of their production facilities to Bangladesh, Sri-Lanka and other countries. It is therefore extremely urgent that the problems being faced by textiles and other industries as mentioned above are solved by the GoP on priority basis so that the industries continue to contribute to the economy of Pakistan.

Indian trade delegation visit to boost bilateral trade

Dr. Mirza Ikhtiar Baig, Federal Advisor on Textile, Government of Pakistan welcomed the Commerce Minister of India Anand Sharma visit to Pakistan with 120 businessmen from India and said it will boost the bilateral trade.

Dr. Baig accompanied the Commerce Minister of Pakistan to Delhi with large Pakistani businessmen delegation and was agreed that the two sides will sign some agreement to remove non tariff barriers hampering the trade between the two countries. Dr. Baig informed that the three agreements signed for promotion of Pak-India trade are: Agreement of cooperation in custom matters, recognition between the quality and inspection agencies – Pakistan Standards & Quality Control Authority (PSQCA) and Bureau of Indian Standard (BIS) to formalize mechanism to harmonize standard of export goods and redressal of trade grievance.

Indian Commerce Minister Anand Sharma said that the trade cooperation between Pakistan and India will bring prosperity and growth in the region. Both countries have decided to resolve their bilateral issues through dialogue including disputes over Kashmir and water. He said our target is to move forward fast to achieve the trade target of US $6 billion within three years.

The present bilateral trade is $2.7 billion per annum with major export surplus in favour of India. He also said that it is the time to stop trade between India and Pakistan via third country like Dubai and Singapore. He also announced opening of second gate of Wagah Border by 30th April 2012 to facilitate the land route trade between the two countries.

 

 
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